A parent received more time to make a consolidated return election

Plain-English summary

A subsidiary acquired the parent of an existing consolidated group, but the resulting return incorrectly identified the subsidiary rather than its own parent as the new common parent. The subsidiary and tax professional were unaware of the upper-tier parent's existence when the return was prepared. After discovering the mistake, the parent sought permission to make the consolidated return election late. The IRS found reasonable reliance on a qualified tax professional and granted 60 days to file a consolidated return naming the correct parent and attaching Forms 1122 for the subsidiaries. The relief was conditioned on aggregate tax liability not being lower than it would have been with a timely election, and the IRS did not decide whether the group otherwise qualified.

Ruling snapshot

• Question: Could the actual common parent make a late election to file the group's consolidated return?
• Outcome: Approved, with 60 days to file, subject to the stated tax-liability condition.
• Key authorities: IRC § 1502; Treas. Reg. §§ 1.1502-75, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201744011                                              Third Party Communication: None
Release Date: 11/3/2017                                        Date of Communication: Not Applicable
Index Number: 1502.75-00, 9100.20-00
                                                               Person To Contact:
-----------------------                                        ---------------------, ID No. ----------------
---------------------------                                    Telephone Number:
-----------------------------------------------                --------------------
                                                               Refer Reply To:
-------------------------------------                          CC:CORP:B04
                                                               PLR-109029-17
                                                               Date:
                                                               August 04, 2017




                           -----------

Legend


Parent            =        ------------------------------------------------

Subsidiary        =        ----------------------------------------------

Partnership =              -------------------------------------------------

Target            =        ------------------------------------------------

Date 1            =        --------------------------

Date 2            =        -----------------------

Date 3            =        ---------------------------

Year 1            =        ----------------------------------------------------------

Company
Official          =        ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

Tax
Professional =             -----------------------------------------------------------------------------------------


Dear -------------:
PLR-109029-17                                 2

This letter responds to a letter from your authorized representative, dated March 13,
2017, requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to file an election. The extension is being
requested for Parent and its affiliated subsidiaries (the “Parent Group”) to make an
election to file a consolidated Federal income tax return, with Parent as the common
parent, under § 1.1502-75(a)(1) of the Income Tax Regulations (the “Election”), for Year

1. The material information provided in that letter is summarized below.

Parent is a corporation that owns all of the stock of Subsidiary. Both Parent and
Subsidiary are holding companies that were formed by Partnership on Date 1 for
purposes of acquiring Target. Subsidiary acquired all of the outstanding stock of Target
on Date 2 (the “Transaction”). Target is a holding company that was the common parent
of an affiliated group of corporations, composed of Target and its own subsidiaries (“Old
Group”).

Subsidiary’s acquisition of Target on Date 2 terminated the Old Group. On Date 3,
Subsidiary and the members of the Old Group filed a consolidated return showing
Subsidiary, instead of Parent, as the common parent of the affiliated group. At the time
of filing of such return, Subsidiary was unaware of Parent’s existence. Subsidiary
believed that it was the common parent of the affiliated group resulting from the
Transaction. Tax Professional was engaged to prepare the return of the affiliated group,
and it advised Subsidiary regarding the need to make an election to file a consolidated
return for the affiliated group. Subsidiary relied on Tax Professional to make such
election. Tax Professional filed the consolidated return on Date 3 with Subsidiary as the
common parent based on information it had received from Subsidiary.

Subsequently, Tax Professional discovered the formation and existence of Parent, and
that Subsidiary had been inappropriately identified as the common parent on the
consolidated return. Accordingly, Tax Professional advised Parent to file a request for
relief on its own behalf to make a late election to file a consolidated return for the Parent
Group, effective for Year 1. Such election was due on the last day prescribed by law
(including extensions of time) for the filing of Parent’s return for Year 1, but for the
aforementioned reasons, a valid Election was not filed by the due date of Parent’s
return. After the due date for the Election, it was discovered that the Election had not
been filed properly. Subsequently, Parent submitted, under § 301.9100-3, this request
for an extension of time to file the Election effective for Year 1. The period of limitations
on assessment under § 6501(a) has not expired for Year 1 or any subsequent taxable
year. Parent has represented that it does not seek to alter a return position for which an
accuracy-related penalty has been or could be imposed under § 6662.

Section 1.1502-75(a)(1) of the Income Tax Regulations provides, in part, that an
affiliated group of corporations which did not file a consolidated return for the
immediately preceding taxable year may file a consolidated return in lieu of separate
returns for the taxable year, provided that each corporation which has been a member
PLR-109029-17                                 3

of the group during any part of the taxable year for which the consolidated return is to
be filed consents, in accordance with § 1.1502-75(b) of the regulations, to the
regulations under § 1502. If a group wishes to exercise its privilege of filing a
consolidated return, such consolidated return must be filed not later than the last day
prescribed by law (including extensions of time) for the filing of the common parent’s
return.

Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable
extension of time to make a regulatory election or a statutory election (but no more than
six months except in the case of a taxpayer who is abroad), under all subtitles of the
Internal Revenue Code except subtitles E,G, H, and I.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make a regulatory election.
Section 301.9100-1(a). Section 301.9100-2 provides automatic extensions of time for
making certain elections. Requests for relief under § 301.9100-3 will be granted when
the taxpayer provides evidence to establish to the satisfaction of the Commissioner that
the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government. Section 301.9100-3(a).

In this case, the time for filing the Election is fixed by the regulations (i.e., § 1.1502-
75(a)(1)). Therefore, the Commissioner has discretionary authority under § 301.9100-3
to grant an extension of time for Parent to file the Election, provided Parent shows it
acted reasonably and in good faith, the requirements of §§ 301.9100-1 and 301.9100-3
are satisfied, and granting relief will not prejudice the interests of the government.

Information, affidavits, and representations submitted by Parent, Company Official and
Tax Professional explain the circumstances that resulted in the failure to timely file the
Election. The information establishes that Parent (through Subsidiary) reasonably relied
on a qualified tax professional who failed to make, or to advise Parent to make, the
proper Election, and that the request for relief was filed before the failure to make the
Election was discovered by the Internal Revenue Service. See § 301.9100-3(b)(1)(i)
and (v).

Based on the facts and information submitted, including the representations made, we
conclude that Parent has shown it acted reasonably and in good faith, the requirements
of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not prejudice the
interests of the government. Accordingly, provided that the Parent Group qualifies
substantively to file a consolidated return for the applicable taxable year, we grant an
extension of time, under § 301.9100-3, for sixty (60) days from the date on this letter for
Parent to file the Election (by filing a consolidated return, with Parent as the common
parent, and attaching a Form 1122 for each of its affiliated subsidiaries for Year 1).
PLR-109029-17                                  4

The above extension of time is conditioned on the Parent Group’s tax liability (if any) not
being lower, in the aggregate, for all years to which the Election applies, than it would
have been if the Election had been timely made (taking into account the time value of
money). No opinion is expressed as to the Parent Group’s tax liability for the years
involved. A determination thereof will be made by the applicable Director’s office upon
audit of the Federal income tax returns involved.

 We express no opinion with respect to whether, in fact, the Parent Group qualifies
substantively to file a consolidated return. In addition, we express no opinion as to the
tax effects or consequences of filing the return or the Election late under the provisions
of any other section of the Code or regulations, or as to the tax treatment of any
conditions existing at the time of, or effects resulting from, filing the return or the
Election late that are not specifically set forth in the above ruling.

For purposes of granting relief under § 301.9100-3, we relied on certain statements and
representations made by Parent, Company Official and Tax Professional, accompanied
by a penalty of perjury statement executed by an appropriate party. However, the
Director should verify all essential facts. In addition, notwithstanding that an extension is
granted under § 301.9100-3 to file the Election, penalties and interest that would
otherwise be applicable, if any, continue to apply.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date on and control number of the
letter ruling.

                                           Sincerely,



                                           Ken Cohen
                                           Chief, Branch 3
                                           Office of Associate Chief Counsel (Corporate)